Account Chamber of the Russian Federation

PERSPECTIVES OF THE OECD AND INTOSAI COOPERATION IN THE SPHERE OF THE PROGRESS MEASUREMENT
SERGEY V. STEPASHIN
Good afternoon!
I am thankful to the OECD leadership for the opportunity to address to this Forum of the prominent experts who are making a concerted efforts to measure progress, and I look forward to our cooperation.
I am addressing to you in two capacities today: as a Chairman of the Accounts Chamber of the Russian Federation and as a Chairman of the INTOSAI Working Group on Key National Indicators - an OECD partner in a progress measurement project.
Early this year we have signed a Memorandum of Understanding between the OECD and INTOSAI and we have already made a good start in our cooperation.
The OECD and INTOISAI strive for a common goal of providing an objective assessment of the socio-economic processes, which requires change-sensitive indicators and adequate methods of progress measurement. Yet INTOSAI has its own specific objectives - to ensure competent selection of key national indicators to enhance the effectiveness of the national decision-making procedures. The INTOSAI Working Group on KNI and the Accounts Chamber of the Russian Federation are seeking to contribute to this goal as an essential precondition for the progress measurement.
Our joint efforts with the OECD started when the global financial crisis was in the full swing that made the international community face a number of serious challenges.
The implementation of international development programs - e.g. UNDP and Millennium Development Goals - was put at risk. By the UN estimate, there will be 55-90ml more people living in extreme poverty than it had been expected before the crisis.
The international financial institutions are subjected to severe criticism for the inability to sustain global financial balance.
National governments of leading countries were taken unawares by the rapid development of crisis processes and had to work out and apply anti-crisis measures in haste.
We have to recognize governments and international organizations did not have any reliable models and "early warning" indicators to forecast the economic storm.
Giving credit to the international community we must say the world leading countries rather rapidly created informal "network" mechanisms for the coordination and synchronization of anti-crisis programs. These networks brought together chairmen of central banks, national financial authorities; the G-20 decided to hold its meetings on a regular basis. Today we witness the first reassuring results of this cooperation - the most severe phase of the crisis has been overcome earlier than expected but the problem of warning is still outstanding. The crisis has reaffirmed the timeliness of the OECD and INTOSAI project in progress measurement. Recent G-20 summit in Pittsburg (USA) have made next steps in reforming the international financial regulatory institutes and in establishing economic policies coordination mechanisms.
It is commonplace that every crisis brings not only new risks but new opportunities as well. On the one hand, the crisis opens new vistas for reducing differentiations in the ways of life due to the more equitable re-distribution of the crisis burden among regions and social groups, on the other - it enhances risks of social unrest caused by the fundamental disbalances.
It is important to understand, meanwhile, who and in what country will acquire devalued national assets in the crisis environment, where new jobs and new centers of the post-crisis economy will be created.
National ratings and stock exchange dynamics, the choice of true or false development goals for countries and regions of the world will evidently depend on the understanding of basic values and key indicators for progress measurement.
The UNDP goals and development priorities are regarded as the baseline, one of them being the sovereign right to identify basic national values and development goals regardless of the country's international position in the economic, political, military or other spheres of development.
Definition of the very notion of "progress», its goals and priorities is a starting point for choosing metrics, criteria and scales for the assessment of key national indicators (KNI), which reflect the degree the progress outcomes comply with the government obligations and public expectations. The KNI assessment impacts, in its turn, the investment climate and competitiveness of projects and countries.
Nobel Prize winner Amartia Sen suggested the definition of "progress" as "freedom" in the monograph under the same title. Unlike Friedrich Engels who defined "freedom" as "awareness of necessity" Sen sees freedom as "awareness of opportunities". Kurt Huebner gives more operational definition of progress - as successful system transformation from the viewpoint of the dominant ensembles of actors.
These definitions allows us to discuss such critical issues as acceptability of the notion of success as benefit for dominating ensembles of actors, to other societal groups; preconditions for the popular accord regarding the basic national values and strategic development goals. The answers to these inquiries in its turn, influence the choice of metrics and criteria for progress, selection of KNIs from the multitude of measurable indicators and determination of their architecture.
These issues are nowadays addressed through a number of international and national projects including the UN International Comparison Program, the OECD Global Project on Measurement the Progress of Societies, Nikolas Sarkozy's and Bill Clinton's global initiatives, World Bank and Davos Forum projects, the INTOSAI project on KNI, etc.
The INTOSAI Working Group, in particular, have collected extensive materials, covering SAIs' experience in developping and applying national indicators, and launched several pilot projects. For example, a regional pilot project with the CIS SAI's participation is now being successfully implemented.
The INTOSAI Working Group on KNI has carried out a scientific and practical test of some methods and technics for the multidimensional visualization of the KNI measurements that were presented at the panel discussion on KNI for the progress measurement earlier today.
Our project also includes the development of the Glossary that has been reported today by the representatives of the US SAI. We are drafting a White Paper, design a reference model and information support for the KNI knowledge base. This requires new concepts and technologies that may ensure visualization, measurement and evaluation of the outcomes including the assessment of goal setting, architecture, and contribution of the socio-economic development participants to the outcome to be achieved.
Transformation is inevitable in this case. In the same way as the compass arrow was replaced now by the GPS, XXI century calls for new, more complex system of coordinates that would reflect multidimensional nature of the economic world as well as of the world of culture.
There are fewer tables in this system one just need to put ticks but there is stronger request for professional evaluations and public exposure that imply greater political risks. But, after all, these are the essentials of the mission performed by SAIs and expert community as a whole.
We understand KNI as not just statistical data but as indicators that reflect the level of public accord regarding the development goals and priorities. Thus they have to contribute to the effective management of change while preserving the country's integrity and national identity.
Designing a new progress metrics is vitally important for many countries associating their future with the growth of global world opportunities and inevitable institutional changes.
The newly developing concept of the capabilities management as capacity to accumulate an increasingly wider specter of capabilities to achieve increasingly wider spectrum of goals, which conforms to Amartia Sen's definition of "freedom as progress".
The concept of the socio-economic capabilities as the purpose and means of progress as well allows us to apply it at different scales, i.e. to an isolated actor contributing to creation of surplus value, to an enterprise, to industry or a national economy as a whole.
Capabilities as an ability of the system to achieve objectives set is something that can be measured and assessed, e.g. to assess the goals setting processes, architecture, and processes of resource utilization.
Subject to assessment may be both the aggregate economic capabilities and components thereof including the actual and potential capabilities.
According to this concept key capabilities may be identified as those characterizing the system's capacity to achieve the goals that should or can not be outsourced, for example, economic competitiveness, defense potential, viability capabilities, etc.
Capabilities, in their turn, may be disaggregated into key development assets such as human capital, material and non-material assets, and implemented processes.
The assessment and coordination of the development scenario for different countries is complicated by the problems of transparency of national metrics and universality of national values and priorities. Transparency is also an essential prerequisite for the implementation of large-scale transnational projects where partners are to be confident in each other's ability to deliver on their obligations.
It should be stressed that all attempts of a uniform approach to the creation of such indicators as the Global Development Index or Global Competitiveness Index were not quite successful. And the reason is not whether the interests of some countries were considered and the interests of the other were ignored. The reason is that the methodological approaches were on the microeconomic concepts reflecting an attempt to present governments as market agents and not as political institutes.
Even though economic progress indicators are being augmented by the social, ecological and humanitarian parameters, under the microeconomic system of coordinates they remain just boundary conditions for the core value adding processes. That is what the economic logic dictates. But this logic is too narrow to describe more complex political and economic processes due to the social values and cultural variety existing along with the system of economic parameters.
The basic principle is, thus, the equal rights of each country for the sovereign vision of national values, choice of goals and development paths.
Asian, African or European countries have very different starting conditions, capabilites, and traditions. While sharing intentions to design a universal metrics for measuring progress in different countries and the whole world, we should respect national, historical, cultural, and economic peculiarities of different countires.
This means the key national indicators development objective should be the transparency of formation, implementation and assessment of the national strategies rather than unification. The prescriptive character of the list enumerating key national indicators of development cannot, therefore, be considered appropriate. It would be even more inappropriate to make the access to the international assistance and to the world investment resources dependent on the system of indicators and relevant reporting obligations imposed from outside.
The national institutes, SAIs included, cannot and should not limit their role with being passive recipients of the world progress measurement architecture; they are supposed to take an active part in designing this architecture. And we are grateful to the OECD for its active participation in the solution of this problem.
We have to recognize that only governmental institutions can ensure sustanable development in accordance with the dominant system of values common to majority of people regardless their economic status. This involves huge amounts of resources allocated for these purposes and government representatives are to held accountable for the outcome of the efforts. That is the reason why we need adequate indicators to assess their performance.
Progress cannot be the subject of economic analysis alone and be measured only by the performance of business units at the micro and macroeconomic levels. In the end progress is the movement of the society towards the enlargement of freedom.
Again, Amartia Sen rightly points out that freedom encompasses not only human and civil rights but also liberty from poverty and violence, from bareness of economic and social opportunities, from inept institutions servicing citizens as well as from intolerance or coming reinvigoration of repressive institutions.
And we have to learn how to measure and assess all these elements. It means we have a lot of work to be done in the future.